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Yahoo
13 hours ago
- Business
- Yahoo
Argan Holds Strong in Barchart's Top 100: Up 66% in 2025 — What's Next for Investors?
The FOMO (fear of missing out) trade is alive and well. That's pushed valuations to the brink. According to Yardeni Research, the S&P 500's forward P/E ratio as of July 31 was 22.5x, while the technology sector's was 30.0x. Both are higher than they've been since 2004. More News from Barchart Nat-Gas Prices Retreat as US Weather Forecasts Cool Crude Prices Pressured on Hopes of an End to the Russian-Ukrainian War Crude Prices Recover Early Losses on Doubts Over Ukraine Peace Plan Get exclusive insights with the FREE Barchart Brief newsletter. Subscribe now for quick, incisive midday market analysis you won't find anywhere else. To further emphasize the state of valuations at present, I calculated the average P/E ratio (those with positive earnings) of the top 10 stocks in Barchart's Top 100 Stocks to Buy. It is 193.3x, almost seven times the S&P 500's forward P/E. Fifty-six of the top 100 aren't profitable over the trailing 12 months. One of the 44 profitable names is Argan (AGX), a Maryland-based holding company with a primary focus on building and construction. It generates revenue from three reportable segments: Power Industry Services (79% of 2024 revenue), Industrial Construction Services (19%), and Telecommunication Services (2%). A growing piece of its business is construction-related services for data centers. That's provided through its largest operating segment: Power Industry Services. With AI guzzling electricity at data centers across the country, the company has kept very busy, with a project backlog of $1.86 billion as of Q1 2026, or nearly three times its 2024 revenue. This acceleration in growth explains why Argan shares trade at 33.1 times its projected 2026 EPS estimate of $6.97 and 28.3 times its 2027 estimate of $8.15. It competes in a very popular sandbox. The data center play has been on a tear since breaking out of a six-year stall in early 2024. Up 66% year-to-date and 387% since the beginning of 2024, Argan stock looks ready to take a break. Here's my two cents on whether now is a good time to buy its stock. Priced for Perfection? Although the company's history dates to May 1961, the holding company's present form came to be in December 2006 when it acquired Gemma Power Systems LLC (GPS) for $33.1 million, which included $12.9 million in cash and the issuance of $20.2 million (3.67 million shares of Argan stock). In fiscal 2008 (January year-end), GPS generated 87% of Argan's $206.8 million in annual revenue. It paid 5.5 times sales for Gemma. Argan stock currently trades at 3.73 times sales. By comparison, two peers that I've recommended in the past 24 months, Limbach Holdings (LMB) and Sterling Infrastructure (STRL), trade at 2.56x and 4.35x, respectively, so Argan's right in the middle based on sales. As for earnings, according to S&P Global Market Intelligence data, its forward P/E has only been higher than it is today on four occasions: March 2019, March 2020, June 2020, and September 2020. While its P/S multiple isn't in nosebleed territory, its forward P/E is relatively high, if not excessive. It's something to keep in mind as the tariffs begin to get their hooks into the economy. One metric I focus on to get an idea of a stock's valuation is free cash flow yield, which is defined as free cash flow divided by enterprise value. Based on Argan's enterprise value of $2.57 billion and a trailing 12-month free cash flow of $178.5 million, its free cash flow yield is 6.9%. I consider anything 8% or higher to be in value territory. On valuation, it remains a stock whose future potential suggests it still has room to run, but only if the economy cooperates. Those backlogs can disappear in a hurry once the economy hits the skids. Profitability Continues to Improve Over the past five years, Argan's revenue and earnings have grown by 266% and 337%, respectively. That's some growth. Of the top 100 stocks to buy, Argan is one of only seven stocks to generate a return on assets of 10% or higher. Sterling Infrastructure is another. Further, Argan is one of only five top 100 stocks to buy with 5-year revenue and earnings growth exceeding 100%. Not even Sterling was able to do so. That's another big positive for owning its stock. On June 4, Argan reported its Q1 2026 results. They were excellent. Revenues increased by 23% to $193.7 million, its gross margin was 19.0%, 760 basis points higher than Q1 2025, and its EBITDA (earnings before interest, taxes, depreciation and amortization) was $30.3 million, 155% higher year-over-year, with an EBITDA margin of 15.6%, 810 basis points higher than a year ago. And, as I mentioned earlier, it finished the quarter with a $1.86 billion backlog, 36% higher than Q1 2025. 'After several years of underinvestment, there is an immediate need for the development of new energy resources, and Argan's energy-agnostic capabilities and proven track record of success position us well as we compete for the construction of large and complex power generating facilities,' stated CEO David Watson. I must admit, I'm a tad biased about the construction industry. My wife owns a small construction firm here in Halifax. She's never short of business. Given the combination of AI with a housing shortage in North America, capable construction firms should be busy for the next decade or more. Sure, a recession will cause a temporary setback of 6-12 months, but the overall potential, especially for those businesses focused on infrastructure, as Argan is, should keep them very busy. The bottom line: If you're prepared for a long-term hold with Argan, I don't think it's too late to buy its stock. Your patience will be rewarded. On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
CNBC
04-08-2025
- Business
- CNBC
US payrolls weakness could be due to lack of labor supply, not demand, says Ed Yardeni
Ed Yardeni, President of Yardeni Research tells CNBC's Squawk Box Asia that the weakness in the latest U.S. jobs report is likely due to the lack of labor supply, not demand and the September Fed rate cut is not a sure thing.
Yahoo
30-07-2025
- Business
- Yahoo
Why the 'Buy America' trade is back
US stocks are back on a winning streak, hitting several record highs in recent weeks. One big reason is that the 'sell America' trade is over, and American businesses now seem set to outperform again. The first four months of 2025 were an American sell-off story. President Trump began announcing new tariffs on imports shortly after taking office in January, as expected. But the severity of those import taxes surprised investors, triggering a sell-off in US stocks and bonds alike. That was unusual, given that US Treasury securities are typically the safe-haven asset investors buy when American stocks seem too risky. The two charts below show the divergence in US and foreign stocks. Through the end of April, US stocks were down 7.5%, while foreign stocks were up 4.6%, for a total US underperformance of 12.1 percentage points. American stocks are now clawing back ground. During the past three months, US shares rose 15.1% while foreign shares rose 7.6%. 'Foreigners love American securities,' economist Ed Yardeni of Yardeni Research declared in a July 21 analysis. The recovery in US assets is happening as Trump announces trade agreements that remove some of the uncertainty about the cost of importing and exporting hundreds of billions of dollars' worth of goods in the coming months. That's clearly fueling an upbeat mood among there's a lot more going on. Stocks rise or fall based on investor assessments of corporate profitability. And many American firms have been signaling that they can manage the Trump tariffs with a minimal hit to profits as they announce earnings results for the second quarter. 'The early batch of Q2 earnings calls reflected a broadly resilient tone,' Mehmet Beceren of Rosenberg Research wrote in a July 25 report. 'Companies across sectors (including industrials, consumer staples, and health care) emphasized proactive mitigation strategies and operational agility.' That's a credit to the remarkable ability of big American companies to adapt to challenges and protect profits. Read more: Live coverage of corporate earnings American firms also look better in comparison with their global competitors, which also face pressure from Trump's tariffs, on the other end of Trump's trade talks. While Trump's import taxes raise costs for American businesses that need imported products, they also create pressure for foreign firms selling to the United States to lower their own prices. Those firms could face more competition at home if part of the trade deal involves more access for US companies to foreign markets. Trump's tariffs may also slow worldwide growth, hitting revenue and profits across the board. In that light, some foreign markets may now seem a bit more vulnerable than they did a few months ago. Tom Lee, co-founder of investing firm Fundstrat, pointed out in a recent video presentation that American stocks have broadly outperformed the rest of the world since 2019. 'That was broken because of the tariff wars," he said. "But I think the trend has actually resumed. And one reason for that is earnings growth.' Some firms are reporting financial harm caused by tariffs, but overall profitability among US firms seems to be holding up. With about 40% of firms reporting second quarter earnings so far, FactSet points out that an average net profit margin of 12.3% is above the long-term average. If that sticks, it will be the fifth consecutive quarter with a net margin above 12% for the S&P 500 (^GSPC) index of US firms. Analysts expect profitability to get even better during the next two quarters. Investors shunning US stocks a few months ago may now be buying out of FOMO. The sell-off in US bonds has also abated. The 10-year Treasury rate rose about six-tenths of a point from early April to mid-May, just as Trump's dramatic tariff threats were roiling markets. That was an unusual move, since investors typically buy Treasurys as a safe haven when there's market turmoil, and more buying pushes rates down. The rise in rates indicated that buyers were selling as if they had lost faith in the whole US market. Read more: What is the 10-year Treasury note, and how does it affect your finances? If they did, they've gotten religion again. Yardeni points out that foreign purchases of US government securities hit a record pace for the 12 months ending in May. 'Foreigners remain very kindly disposed to buying US securities,' he wrote. Rates, in turn, have declined, with the 10-year falling from 4.6% on May 21 to 4.34% in late July. Whether America is back for good or just for a while remains an open question. There's still plenty to worry about. Trump's tariffs haven't reignited inflation yet, but with the average tax on imports jumping from 2.5% at the start of the year to about 20% now, higher prices for some products are certainly in the pipeline. Many economists think inflation, currently 2.7%, could rise to around 4% by year-end. Businesses and consumers are taking that risk in stride, for now. But there's also a hiring slowdown, with rising odds of 1970s-style 'stagflation' materializing. Massive amounts of federal borrowing are also putting upward pressure on interest rates and making federal finances ever more precarious. Some economists thought the spring sell-off in Treasurys was the start of a debt crisis. It could still unfold that way, given that some financial crises start off slowly, then happen quickly. For now, the consolation may be that everybody else has problems too. Rick Newman is a senior columnist for Yahoo Finance. Follow him on Bluesky and X: @rickjnewman. Click here for political news related to business and money policies that will shape tomorrow's stock prices. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
CNBC
28-07-2025
- Business
- CNBC
Ed Yardeni: Amazing how well the U.S. economy and stock market have done despite Washington
Ed Yardeni, Yardeni Research president, joins 'Squawk Box' to discuss the latest market trends, state of the economy, impact of tariffs, inflation concerns, the Fed's inflation fight, and more.
Economic Times
24-07-2025
- Business
- Economic Times
Markets betting on economic strength, not trade deals: Ed Yardeni
"But the stock market has concluded that maybe the US economy is resilient enough to withstand all the volatility and uncertainty that is coming out of Washington on tariffs. And maybe the same thing seems to apply to the to the global economy," says Ed Yardeni, Yardeni Research. ADVERTISEMENT What are you making of the speculation that the street has right now with the US-EU deal? The number is being pegged at 15%. What could that look like? Ed Yardeni: Yes, it very much looks as though the President Trump is aiming now at a 15% base tariff. For a while there it looked like he was satisfied with 10% and then would negotiate whether there would be any additional tariffs depending on the conditions that were open or close to American goods in various countries. But now it looks like he wants 15%. The reason for that is he needs it to help raise revenues to help to reduce the federal deficit. At the end of the day that tariff is going to wind up being a tax probably mostly at American businesses and American consumers and to a certain extent I presume that foreign exporters will be leaned on by their American customers to try to help to a certain extent. But all in all, he is getting kind of what he wants. It will probably be 15% base rate with the EU and then we will see whether the EU opens up. It is hard to imagine that they will because they have been relatively closed for quite some times because a lot of special interest groups that do not want to have easy competition for foreign companies. I am just wondering how does one read into the reaction of the equity markets? I mean, I can see that the VIX is compressing quite sharply. You have got the dollar index which is completely stabilised now. Do you think the markets have much priced in all the tariff negotiations so far? Ed Yardeni: Well, the markets have priced in a fairly optimistic scenario. It is quite a radical change from what the thinking was in the markets back in March, April, and maybe even early May. But really ever since the president backed off or postponed his Liberation Day tariffs on April 2nd, he announced them on April 9th, he postponed them. And now we have got a hard deadline of August 1st. And we are getting some deals, but we certainly did not get 90 deals in 90 days, that that did not happen. And some of these deals that we have so far look more like frameworks than not. But the stock market has concluded that maybe the US economy is resilient enough to withstand all the volatility and uncertainty that is coming out of Washington on tariffs. And maybe the same thing seems to apply to the to the global economy. ADVERTISEMENT All in all, the global economy has held up pretty well despite all the turmoil about tariffs. This does not look like Smoot-Hawley, the 1930s tariff that brought the global economy down and maybe that is because economies are stronger. They are more services oriented. Tariffs are usually put on goods, not on services. But when you put it all together, the stock markets around the world, but particularly in the United States, are discounting what I have been calling since the beginning of the decade the roaring 2020s. There is a lot of focus on technological innovation and how that is going to increase productivity. Let us face it, there is a lot of excitement about artificial intelligence everywhere around the world. Everybody wants to suddenly build these data centres. Some of that is going to turn out to be hype. Some of that may turn out to be leading to overcapacity. But for now, it is happy days are here again. ADVERTISEMENT So, what does that indicate about which way money is going to move in? And do you think it continues to be US first and then emerging markets or is there a tactical shift there? Ed Yardeni: Well, I have been very focused on overweighting the US since 2010, and it has worked out really-really well. Not earlier this year, but now it looks as though maybe the US again looks like it is winning relative to other countries. Look, it is not that hard to underweight the United States and overweight the rest of the world because the United States accounts for 70% of the market capitalisation of stock markets around the world. So if you feel uncomfortable with that and you want to only put 65% in and therefore overweight the rest of the world that is fine if you can find the opportunities and there are opportunities including India, of course, which has already done remarkably well. But all in all, we are looking at a situation where investors are getting a little bit excited here, maybe too excited, but I am looking for bull-bear ratios to get to the point where there is just too many bulls. We are not quite there yet, but we could get there very quickly. ADVERTISEMENT How do you assess the current sentiment shaping up for the global auto sector as a whole because we just had the earnings from Tesla, which was once again a miss, this whole US and Japan deal that is through, that bodes well for the Japanese auto sector. And now, there is a chatter of that US-EU deal as well. How do you see the sentiment for the global auto sector as of now? Ed Yardeni: Well, I think that sentiment certainly improved overnight in Japan. We saw those stocks doing very well. On the other hand, GM has been hurt by to the tune of a billion dollars by Trump's tariffs. And we have yet to really see these tariffs settle in. There is still uncertainty about exactly what they are going to be, but that uncertainty will be gone presumably within a couple of weeks, we will know exactly what the tariffs are. And the auto industry is still going to be challenged. I look at it as a long-term issue. The real long-term issue for autos is we are going to have autonomous cars. We are going to have cars that drive themselves and then the question is, what is the point of owning a car if you can get access to cars that will take you anywhere any time of the day, what is the point of having your own car parked in the parking lot of your work and or in the garage at night? On the other hand, if you want to make some money, you can buy a car and make autonomous taxi out of it. So, there is a lot of challenges here, but we may not need as many cars as we have out there if we can all just use an app to call a car.
